If you’re looking to buy a commercial property, there are a few important things you should consider. The first thing to determine is the amount of income it will generate so you can ensure the numbers all add up and make sense. Will the property be able to pay for itself?
If the numbers work, the next step would be to determine what you can afford. You need to consider interest rates, mortgage payments, taxes, insurance, and repairs to make sure the proposition will be manageable. Buying a property is not like buying a car; it’s a longer-term investment and something you buy and use for many years, so the decision to purchase should not be taken lightly.
Before committing to a contract on a commercial property, whether considering a move of your business into a new commercial property or investing in one to lease it to someone else, there are important questions you should ask yourself before acting.
What to look for when buying commercial property?
Location
When buying a commercial property for investment, you should look for a prime location. If you’re unsure about the location, maybe consider renting for a while until you find the property you want to make your own.
If you’re determined to buy sooner rather than later, it makes sense to look at a few properties to be sure they are in the right location first, because you may end up in an area that doesn’t suit the business you are intending to locate there.
It’s also important that the zoning of the property’s location aligns with your intended use. When you perform your due diligence search on the property, your local council should be able to provide this information.
What industries and other businesses are nearby?
Consider what other businesses or industries surround the property. You do not want to commit to a property and end up with one that is near a residential neighbourhood. And neither do you want to purchase a property that is too close to a direct competitor. Ideally, you should look to surround yourself with businesses that complement yours so you can make the most of potential foot traffic.
Specific aspects of the building, such as state of repair, ongoing costs
I recommend you hire an experienced professional to undertake the necessary inspections of the property to be sure it’s either in good repair or the contract recognises work that needs to be undertaken and compensates for this, or alternatively commits the owner to completing the work prior to sale. Failing to have a professional inspection is almost asking for things to go wrong, it’s a must-do in the process of buying any property.
You should also become aware of ongoing property expenses such as any body corporate fees, rates, water bills, etc. All of these need to be considered when deciding the viability of the property.
Other considerations to keep in mind
- Commercial real estate can be an expensive investment. And it may not appreciate at the same rate as residential property. Speaking to an experienced commercial property professional is an important step in deciding if this is the right move for you.
- Lending for commercial property usually comes with higher interest rates than residential property, there are still competitive deals available.
- Because lenders consider commercial loans riskier than residential loans, you’ll likely be asked for at least a 20% deposit. Sometimes this can be negotiated, depending on the current business climate.
- Having a strong business plan to demonstrate your capability to service the loan is beneficial.
A well-considered commercial property purchase can be a really smart move for your business and also for long term investment. If this is something you’re ready to explore, I’m available and keen to find the best loan solution for you! Give me a call on 0468 455 685 and let’s make it happen.